The government has allowed as many as 26 municipal corporations — including those in New Delhi, Navi Mumbai, Pune, Kolkata, Nashik, Ahmedabad, Hyderabad, Jaipur, Bhopal and Lucknow — to issue bonds to raise funds for developing urban infrastructure under initiatives like Smart Cities Mission and AMRUT, senior government officials told FE. It is for the first time such a large number of local government bodies have been allowed to hit the bond market.
The Union urban development ministry expects municipal bonds of Rs 7,500 crore to be issued in the current fiscal itself, said an official source. Although it’s too early to have a precise estimate of the overall bond size of these 26 corporations, as many of them are yet to initiate the processes, some analysts peg it at around Rs 10,000 crore.
The urban development ministry has proposed to offer the municipal corporations a 2% interest subsidy on the size of bonds after the finance ministry turned down its request to make gains from the municipal bonds tax-free for investors.